McKesson 2016 Annual Report Download - page 88

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
5. Divestiture of Businesses
During the second quarter of 2016, we sold our ZEE Medical business within our Distribution Solutions
segment for total proceeds of $134 million and recorded a pre-tax gain of $52 million ($29 million after-tax)
from this sale.
During the first quarter of 2016, we also sold our nurse triage business within our Technology Solutions
segment for net sale proceeds of $84 million and recorded a pre-tax gain of $51 million ($38 million after-tax)
from the sale.
These divestitures did not meet the criteria to qualify as discontinued operations under the amended
accounting guidance, which became effective for us in the first quarter of 2016. Accordingly, pre-tax gains from
both divestitures were recorded in operating expenses within continuing operations of our consolidated
statements of operations. Pre and after-tax income of these businesses were not material for the year ended
March 31, 2016.
6. Share-Based Compensation
We provide share-based compensation to our employees, officers and non-employee directors, including
stock options, an employee stock purchase plan, restricted stock units (“RSUs”), performance-based restricted
stock units (“PeRSUs”) and total shareholder return units (“TSRUs”) (collectively, “share-based awards”). Most
of our share-based awards are granted in the first quarter of each fiscal year.
Compensation expense for the share-based awards is recognized for the portion of awards ultimately
expected to vest. We estimate the number of share-based awards that will ultimately vest primarily based on
historical experience. The estimated forfeiture rate established upon grant is re-assessed throughout the requisite
service period and is adjusted when actual forfeitures occur. The actual forfeitures in future reporting periods
could be higher or lower than current estimates.
The compensation expense recognized has been classified in the consolidated statements of operations or
capitalized in the consolidated balance sheets in the same manner as cash compensation paid to our employees.
There was no material share-based compensation expense capitalized as part of the cost of an asset in 2016, 2015
and 2014.
Impact on Net Income
The components of share-based compensation expense and related tax benefits are as follows:
Years Ended March 31,
(In millions) 2016 2015 2014
Restricted stock unit awards (1) $ 88 $137 $126
Stock options 22 24 22
Employee stock purchase plan 13 13 12
Share-based compensation expense (2) 123 174 160
Tax benefit for share-based compensation expense (3) (41) (61) (55)
Share-based compensation expense, net of tax $ 82 $113 $105
82